Barclays set aside another 1 billion pounds to compensate customers for mis-selling products, dropping another British banking bombshell as the industry struggles with the scale of redress for past misdemeanors.

UK banks are embroiled in two separate mis-selling scandals, and Barclays said on Tuesday it had made an extra provision of 600 million pounds to compensate customers for payment protection insurance. PPI mis-selling alone has now cost UK banks over 12 billion and could end up more than double that, industry sources estimate.

Tuesday's announcement marked Barclays' fourth provision for PPI, dating back to May 2011 when the industry lost a court case on the selling of products to customers who did not need, or could not use them.

It has now set aside 2.6 billion pounds to settle claims for mis-selling of PPI - loan insurance to protect borrowers who missed repayments due to illness or redundancy, but which was often sold to people who were not eligible to claim.

Later on Tuesday Barclays' new Chief Executive Antony Jenkins and Chairman David Walker are due to testify to a parliamentary inquiry into banking industry standards. This was launched after Barclays was fined $450 million last June in a third scandal over the rigging of Libor interest rates.

Jenkins, who used to run retail banking at Barclays, is likely to be grilled on why the bank - and the industry - has consistently underestimated the scale of redress for PPI claims.

Barclays also set aside 400 million pounds more to cover claims for mis-selling interest rate hedging products (IRHP), almost doubling its provision to 850 million and firing a warning shot that other banks face big bills too.

Britain's financial regulator said last week that a pilot study showed banks had mis-sold complex interest-rate hedging products to small businesses which did not need them or did not understand the risks involved, opening the door for billions of pounds in payouts.

"This (Barclays' provision) is by far the highest among UK banks and suggests further provisions by RBS, Lloyds and HSBC," said Shailesh Raikundlia, analyst at Espirito Santo.

Barclays said it had paid out only 36 million pounds on IRHP by the end of last year. It had about 5,000 IRHP policies.

By 0830 GMT Barclays shares were up 0.3 percent at 292.4 pence, lagging a 0.8 percent rise by the European bank index.

Revival stuck
Jenkins, who took over as CEO in August after his predecessor Bob Diamond was ousted after the Libor fine, is attempting to revive Barclays after the string of scandals and has promised to improve culture and standards across the bank.

But PPI mis-selling occurred in the retail division he previously ran, and he said last week he would not take a bonus for 2012, saying he should "bear an appropriate degree of accountability" for the difficult year the bank endured.

He has warned that his turnaround plan, to be unveiled on February 12, could take 5-10 years to fulfill.

PPI has developed into the biggest ever mis-selling scandal for UK banks, who are trying to set a time limit for when customers can claim to draw a line under the payouts.

Barclays said it had paid out 1.6 billion in compensation by the end of December, or 62 percent of its provision.

Last month, the head of Britain's Financial Ombudsman Service said banks only had themselves to blame for the spiralling costs of the scandal, which she said could have been contained if they had addressed the issue earlier.

The ombudsman service, which steps in when banks and their customers cannot reach an agreement on compensation, said it was receiving up to 10,000 complaints each week about PPI and has hired 1,000 new staff to cope with the caseload.